Wood Group held back by Canadian oil uncertainty

Tue Aug 20, 2013 8:59am EDT
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By Andrew Callus

LONDON (Reuters) - Energy services company John Wood Group (WG.L: Quote) expects weakening Canadian demand to restrict earnings growth for its oil and gas engineering division this year and into 2014.

The British company has been a strong performer in the European oil services sector while others have suffered from project delays this year. But delivering first-half profit growth broadly in line with analysts' expectations, Chief Executive Bob Keiller said it was "not immune" to that trend.

"We have seen some reduction in western Canada ... where uncertainty over oil export routes is causing some of our customers to rethink their investment options and to delay projects," he said on Tuesday.

Canada's land-locked Western province of Alberta is home to the tar sands, one of the world's largest crude oil deposits. Plans to carry the oil west to the coast for export to Asia and south to U.S. markets have become mired in political and environmental controversy.

The company is a leading service provider to the tar sands sector.

Wood Group downgraded the outlook for 2013 growth in its engineering division's earnings before interest, tax and amortization (EBITA) to 10-15 percent, from 15 percent previously, and said there are "challenges to growth in 2014".

The division, which provides equipment and pipelines as well as performing work on oil-well integrity and corrosion management, accounts for about half the company's profit.

"With muted outlook commentary, we see risk to consensus estimates for 2014/15," said Credit Suisse analyst David Thomas in a research note that cut his earnings-per-share forecast for 2013/14/15 by 3, 8 and 9 percent respectively.   Continued...